Investments at risk: Companies are withdrawing from Germany!

Investments at risk: Companies are withdrawing from Germany!

Companies in Germany are currently holding back on investments. According to the German Chamber of Commerce and Industry (DIHK), only 24 percent of companies plan to increase their investments. This is the result of a new economic survey published on Tuesday. Less than 20 percent of companies can imagine expanding their capacities, while a third of those surveyed intend to reduce investments. DIHK general manager Helena Melnikov describes the current situation as sobering.

The survey not only shows reluctance at home, but also reveals that Germany is becoming less attractive as a location. Business associations cite high energy costs, high taxes as well as bureaucratic hurdles and long planning and approval procedures as major location disadvantages. These circumstances contribute to the fact that gross domestic product is expected to stagnate in the current year after two years of negative growth figures.

Risky framework conditions

In addition to internal challenges, companies also face external risks. US President Donald Trump's customs policy in particular is seen as a major source of uncertainty. Melnikov emphasizes that companies must find the courage to invest if they want to enable economic growth. Current investments in equipment are still ten percent below the level before the corona pandemic, which makes it even more difficult to adapt to economic circumstances.

The DIHK economic survey at the beginning of the year also shows that 40 percent of the companies surveyed are planning to shift their investments abroad, a decrease from 42 percent in the previous year. The main motivator for these foreign investments is cost reduction, which at 35 percent represents the highest level since the 2008 financial crisis. In this context, 30 percent of small companies (up to 200 employees) are planning foreign investments, which represents a decrease of 31 percent compared to the previous year. In contrast, large companies (over 1,000 employees) show more stable planning: 80 percent of them still intend to invest internationally.

Threat of high costs

Geopolitical tensions and a weak economy are putting additional strain on companies. 76 percent of companies see high energy prices as a major business risk. These circumstances have led to two out of five industrial companies wanting to reduce their domestic investments. While the motivation to develop the market drops to just 30 percent, cost reduction is becoming increasingly important.

The target regions for foreign investments are also changing. While the Eurozone remains important at 64 percent, North America is gaining in importance at 48 percent, especially in mechanical and vehicle construction, which has reached a record level of over 60 percent. In contrast, investments in China (31 percent) and Asia Pacific excluding China (21 percent) show declines, indicating a strategic reassessment of global markets.

Politicians need to take action to reduce high energy prices, offer tax relief and reduce bureaucratic hurdles. Only through decisive measures can the locational disadvantages be overcome and the willingness to invest in Germany increased again.

For further details on the results of the DIHK economic survey and the current general conditions, read the reports from Northern Courier and DIHK.